4. An investor invests 40% of her wealth in a nsky asset with an expected rate a

Question

4. An investor invests 40% of her wealth in a nsky asset with an expected rate and a standard deviation of 28%, and she puts 60% in a Treasury bill (the pays 5%. Her portfolio's expected rate of return and standard deviation are of return of 10% risk-free asset)that and respectively A. 8.2%;67% B. 5.6% 22.4% C. 796; 22.13% D.796; 11.2% sold the 5. You purchased a stock for $100. 6 months later you received a dividend of S4 and period return on this investment? A. 5.89% B. 12.65% C.-5.48% D. 18.81% stock for $105. Assume this is the only dividend you received. What was the annualized boldisng 6. Which of the following loans is the most expensive? Loan X: APR-10%, compounded monthly Loan Y: APR = 10.2%, compounded quarterly. Loan Z: APR-10.1%, compounded semi-annually A. Loan X B. Loan Y C. Loan Z D. They are all equally expensive

Explanation / Answer

4) Expected return = 40% *10% + 60% * 5% = 7%

Standard deviation of portfolio = 40% *28% + 60% *0% = 11.20%

5) Holding period returnover 6 months = (105 -100 + 4) / 100 *100 = 9%

Annualized return = (1 + Holding period return) ^ (2) = (1+ 9%)^2 - 1 = 18.81%  

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